Charges loom in Australian 'scan scam'

June 7, 2000

19 radiologists could be jailed for backdating MR machine orders As many as 19 Australian radiologists could face criminal charges in what is being called the biggest Medicare fraud in that country's history, but the federal investigation may

19 radiologists could be jailed for backdating MR machine orders

As many as 19 Australian radiologists could face criminal charges in what is being called the biggest Medicare fraud in that country's history, but the federal investigation may drag on until the end of this year.

According to Australian newspaper and television reports, the alleged "scan scam" first came to light late last year, when a Health Insurance Commission investigation found that the number of MRI machines purchased or ordered had nearly doubled in a very short time. The radiologists are under investigation for allegedly backdating purchase orders.

A May 1998 federal budget change for the first time allowed Medicare reimbursement for MRI procedures, making the machines much more lucrative to operate. A typical machine costs A$3 million (US$1.7 million). Each machine could take in some A$1.5 million a year in reimbursements for procedures.

A report issued May 10 by the Australian National Audit Office (ANAO) said that testimony to the HIC revealed a surge in orders in the four working days before "Budget Night," when parliament declares the federal budget is fixed.

The ANAO found that an 11-doctor MRI task force set up by the government and the Royal Australia and New Zealand College of Radiologists (RANZCR) to discuss ways to improve access to MRI services most certainly understood that the government planned to give rebates for machines purchased before the federal budget was released.

The HIC investigation begun last December found that as many as 250 of the country's 1100 radiologists could have taken advantage of the rebate by backdating contracts with vendors or by entering nonbinding verbal contracts. Knowledge that reimbursement was about to increase for MRI procedures gave radiologists a potential "insider trading" advantage.

The ordering pattern looked suspicious. The country had only 64 machines installed before the Medicare changes went into effect, according to the ANAO report. But some 46 MRI machines were ordered after the task force began negotiations over a possible rebate, 33 in the week just before the budget was released.

Minister of Health Michael Wooldridge met with the task force doctors shortly before the budget deadline, although there is a difference of opinion as to whether Wooldridge told the doctors that Medicare would be reimbursing for MRI procedures. In his public statements before parliament, Wooldridge has denied it, although the radiologists would certainly have known, regardless.

Furthermore, the task force radiologists were to report back to RANZCR, so the word could easily have been spread, whether the health minister was involved or not. In fact, there had been speculation at the April 1998 meeting in Australia of the International Society for Magnetic Resonance in Medicine that there might be changes in MRI funding.

The investigation was triggered by Shadow Health Minister and member of parliament Jenny Macklin, who said she started getting tips about possible wrongdoing in late 1998.

"Information came from people who let the government know and let us know. We got various anonymous letters and e-mails from radiologists and people in the industry," said Macklin, who represents the Melbourne suburb of Jagajaga.

"The whole process of negotiation led (radiologists) to know the government meant to exchange Medicare rebates," she said. "There were about 12 people on the panel reporting back to the college of radiology what was going on."

Asked whether Health Minister Wooldridge is involved, Macklin pulled no punches.

"Dr. Wooldridge yesterday lied to the Australian people about when he first knew about crucial flaws in the evidence he has used to defend himself in the MRI scan scam," she said May 13. "Dr. Wooldridge's six-month cover-up has been exposed. His defense is in tatters. There is no one else to blame. He must resign. Dr. Wooldridge is a repeat offender...and it is time for him to resign or be sacked."

The Australian Labor Party, of which Macklin is a member, attempted to censure Wooldridge in parliament, she said, but lost the vote along strict party lines. The health minister is a member of the majority Liberal Party. His office did not return phone calls.

"It's clear from the auditor general's report (that) he is involved," Macklin told SCAN. "He was the person authorized by the Cabinet to negotiate with the radiologists, and he was the one at the crucial 6th May meeting who had information to give them, and the radiologists say he is the one who gave them this information."

The head of the MRI task force, Dr. Philip Dubois, was himself accused of spending more than A$10 million on machines just before the deadline. He has refused to be interviewed for months, and has hired a PR firm to field questions.

Dr. Michael Sage, past president of RANZCR and another member of the task force, did not return phone calls.

The doctors have reason not to comment, with nearly a quarter of Australia's radiologists under investigation. According to a media officer for the Commonwealth Director of Public Prosecutions, there are 11 briefs open, meaning the HIC found evidence of criminal fraud by that many people.

The spokesperson said that there may be up to 19 charged, but she refused to say what charges might be brought or when that might occur. A reporter who has covered the story from the beginning, John Kerin of The Australian, said indictments may not happen until the first of the year.

Macklin said insider trading is almost impossible to prove, but that the backdated orders could lead to fraud charges. "The evidence should be the paper trail," she said.

As to whether suppliers might have known the orders were suspicious, Macklin said that it would be a matter for the public prosecutor to look at. "The HIC looked at it," she said.

Larry Miller, Marconi's vice president for Asia/Pacific, said his understanding is that the Medicare licenses will be withdrawn for all scanners, except for seven purchased for rural sites.

"We had 10 or 12 orders before the cutoff date," Miller said, "and all those orders were booked and shipped."

Those MRI machines had all been paid for, he said.